Filing Taxes Online - Free Federal Tax Filing Program In October of 2002, a 3-year partnership agreement between a group of tax software companies including Turbo Tax and the Internal Revenue Service (IRS) was formed. This partnership was formed to provide a free Federal tax filing program for at least 60 percent of American taxpayers. This program is known as the Free File Alliance.

In October of 2005, the IRS and the same group of tax software companies reached a new four year partnership agreement for free filing of taxes online. The new Free File Alliance agreement continues to provide free Federal tax filing to those who have an adjusted gross income (AGI) of $52.000 or less. This amount will vary among the tax software partners.

Why is the Internal Revenue doing this?

* The IRS has a goal of 80% of all Federal tax returns to be filed online by the year 2007. Currently over 70 million people are filing their taxes online.

* The Federal Government believes that electronic tax preparation provides a more accurate way of preparing and filing taxes.

* The Federal Government also believes that a partnership with existing tax software companies will provide the the best service to taxpayers.

The Free File Alliance provides free federal tax filing and preparation at no cost to those who qualify.

* If your adjusted gross income is less than $52.000 or,

* You qualify for the earned income credit (EIC) for tax year 2006, then you qualify for the free Federal tax filing program or,

* You are an active Military, Reservist, or National Guard member whose gross income (AGI) for 2006 is less than $52.000.

Things to do in order to renew your claim:

The first step is receiving your Annual Review Pack in your mailbox. All that is needed is there. Make sure that you have your documents prepared so you will easily check the items concerning your award and you will be able to calculate your income. Among these there must be a your last pay slip or P60 for the former tax year, your Self Assessment tax return, if you happen to be self-employed and all records and receipts for childcare costs. Be careful to read the instructions on the form when receiving the pack. It is better if you also verify that we have the right information concerning your personal circumstances throughout your award and that this information is also complete. The last step consists of receiving a note from us and you will know what forms you need to fill and when to return them. After you have completed filling the forms you send us the information and you wait for it to be processed.

Why do you have to renew your claim?

Even if your award is waiting to be renewed, you shouldn’t worry that your existing tax credits will seize. Payments will continue to reach you. It may be the case you will be asked to supply information and you to do so by a certain date. If you don’t deliver the information by that date, your payments will stop. More than one Packs will be sent to those individuals that have had more than one tax credits award in the last tax year. For example, there was an award jointly with a partner along with the individual award.

Because of a partnership between the Internal Revenue Service (IRS) and 19 Free File partners, including Turbo Tax Online, many taxpayers are now eligible for free online income tax filing.

If you qualify, you can use Turbo Tax Online, or any other of the 19 Free File partners, to prepare and file your income tax return online for free. This program is known as the IRS Free File Alliance.

This free tax filing program is designed for lower income taxpayers with simple tax situations and includes IRS and State tax forms and schedules. However, it is not designed for more complex tax situations such as investments, rentals, royalties, farming, foreign earned income, partnerships, s corporations, estates or trusts.

In addition, twenty-one states have also created free file programs based on the Federal free tax filing program. This means you may also qualify to file your State taxes for free with the Freedom Edition tax software.

Free File differs from conventional tax filing in that Free File is an electronic tax program. You must use a computer and have Internet access to use the free tax filing service. Users enter their income tax data online and tax calculations are made by the online tax software. Completed tax returns are then sent to the Internal Revenue Service (IRS) through the efile system.

Using the (IRS) e-file system allows you to get your tax refund back in as little as 10 days. If it ends up that you owe money, you can have it deducted from your bank account on the last day of tax filing season.

Like everyone else, I am concerned about making and saving money. Unfortunately, there are no easy solutions and the decisions we make require careful contemplation. Stress arises when we do not have all of the information we need to make an informed decision or when we do not understand the information that is presented. My friends, I will attempt to shine some light on the process I use to determine appropriate use of the subchapter S corporation. Warning, this article might contain information that is boring and sleep inducing. Please do not read this article while driving and avoid operating heavy machinery.

Let's start by defining what a subchapter S corporation represents. The entity is formed at the state level and serves to provide liability protection for its owner or owners. After the entity is formed, the decision is made to become a S corporation. This is a tax election. One files form 2553 with Internal Revenue by the 15th day of the third month of a given year and is afforded S corporation status for this year. As opposed to a C corporation (a taxable entity in and of itself), earnings from the S corporation flow through to its shareholders avoiding any corporate level tax. These flow-throws avoid the implementation of self-employment taxes (or SE tax) making it seem quite beneficial to would be taxpayers. As with many situations in the world of income tax, beauty is only skin deep leading us to a world of tax traps and audit magnets. What is a business owner to do when faced with making the decision to be a S corporation? The business owner should be listening to my show, "Better Business" as well as reading all of my articles to best inform himself of what lies ahead. As always, you are invited to get clarification of what I discuss through my articles or through my radio program (see below on how to get your questions answered for free).

If I am going to form a new business, I will first assess the need to limit liability. If I decide to form an entity at all, I will then decide on the best form for business and income tax considerations. The S corporation is good for single owners and situations where it is practical to allocate income and losses based on ownership percentages. Let's use the example of you and I forming a business entity and owning it on a 50/50 footing. We might set our salaries at $50,000 each with additional earnings allocated to us on a 50/50 basis. This will work fine as long as we both agree that we have the same value to the business. But what if you do more work than I do? Well, you could take more salary possibly and then we could split any remaining earnings 50/50. We could however, get to the point where we are taking out salary to balance our improprieties thus defeating one of the purposes of electing S status in the first place. Please give careful consideration as to who the owners will be and how profits and losses will be divided.

What about deducting losses incurred at the S corporation level on the personal returns of its shareholders?Is this allowable? I just read an article that said you can do this very thing. I caution you to beware. There is such a concept as basis limitation. If it is projected that losses will result in the first few years of operation, one must have basis in order to deduct these losses personally. Basis in subchapter S stock will consist of capital contributions such as stock and loans made by the shareholder or shareholders directly to the entity. We cannot simply personally guarantee the loans and have the proceeds then deposited in the S corporation. If we are going to borrow money to loan to the entity, we must do so personally and then transfer the proceeds from our personal accounts to the S corporation accounts. This will then give us basis to take losses. Now I think it is important to mention here that as we repay these loans to ourselves, we will have to pick up income on our personal returns either as ordinary or capital gain income. If we put the proceeds in as capital stock or paid-in capital , we will not have to worry about recapturing this income as we will not be permitted to get the funds repaid. If this does not suit our needs, we may be better off forming a partnership or sole proprietorship.

There are many other instances that one should be made aware of while considering the formation of a S corporation. The S corporation is not permitted to provide fringe benefits to more than 2% owners of the entity. If one is looking for deductible fringe benefits, look to the C corporation as a possibility. If one expects to be very profitable right out of the gate, the S corporation can provide protection against unreasonable compensation charges that might be assessed against a C corporation and can provide SE tax savings that might otherwise be levied against sole proprietorship earnings. If a corporation wishes to make the S election after having operated as a C corporation, it will need to have its assets valued as of the date the entity first operates as a S corporation. This will identify assets that have what is known as, "built-in gains". If any of these assets are sold during the next ten years, they will trigger corporate level tax even though the entity has elected S corporation status. If one is going to convert from C corporation to S corporation, seek competent professional help to make certain that assets are valued properly and that their values are allocated appropriately.

In the future, I will add more information regarding S corporations to my collection of ezine articles and I invite you to visit my website at www.mwibonline.com and you are always welcome to the most complete business program on radio, "Better Business".

The Internal Revenue Service (IRS) has forged an alliance with various tax software companies to offer a free tax file service for lower-income taxpayers. This alliance is known as the Free File Alliance.

The Free File Alliance allows individuals to prepare and file their taxes online for free. There are three basic requirements to determine whether you qualify for free electronic tax filing.

In order to qualify for the free tax file service you must meet one of these eligibility requirements.

* Your 2006 adjusted gross income (AGI) must be $28.000 or less. If your adjusted gross income is more that $28.000 you may not be eligible for free electronic tax filing. Or

* Any Military, Reservist, or National Guard member whose gross income (AGI) for 2006 is less than $52.000 qualifies for free online tax filing. Or

* If you qualify for the earned income credit (EIC) for tax year 2006 then you qualify for free Federal tax filing.

To use Free File you must use one of the tax filing companies that has been approved by the Internal Revenue Service (IRS). Tax software companies such as TurboTax are part of the Free File Alliance and are approved and equipped for free tax filing. Free tax filing can only be done through a computer with an Internet connection. Paper returns are not an option with Free File.

The program also offers free State tax filing for those who qualify. Currently there are 21 states participating in the free tax file program. The tax preparation company you choose should have a list of the 21 participating states.

Commercial online tax preparation and tax filing services, usually have a tax filing fee. In most cases, the fee is minimal and can save you a lot of money versus using a paid tax preparer.

However, there is a program developed through a partnership with the Internal Revenue Service (IRS) and a group of tax software companies called the Free File Alliance. With this program taxpayers may be eligible for free online tax filing. Since 2003, more than 15 million taxpayers have been able to file their taxes online for free.

In order to qualify for free online taxes you must meet one of these eligibility requirements.

* Your 2006 adjusted gross income (AGI) must be $28.000 or less. If your adjusted gross income is more that $28.000 you may not be eligible for free online tax filing. Or

* Any Military, Reservist, or National Guard member whose gross income (AGI) for 2006 is less than $52.000 qualifies for free online tax filing. Or

* If you qualify for the earned income credit (EIC) for tax year 2006 then you qualify for free Federal tax filing.

One of the major ways Free File differs from conventional tax filing is that Free File is an electronic tax program. You must use a computer and have Internet access to use the free tax filing service. Users enter data and tax calculations are made by the tax software. Completed tax returns are then sent to the Internal Revenue Service (IRS) through the efile system.

If you have a refund due, you can elect to have the amount direct-deposited into your bank account. If you owe money, then you can elect to have the amount debited from your bank account on the last day of tax filing season.

With lower prices for computers and Internet access easily available, the number of people filing their taxes online continues to grow. Millions of new users each year join the 60-70 million current users of online tax filing.

Through a partnership between the Internal Revenue Service (IRS) and tax software companies, such as Turbo Tax, lower income taxpayers are now able to file taxes online for free. This partnership is known as the the Tax Freedom Project.

The Tax Freedom Project makes free income tax filing online available to taxpayers who meet certain eligibility requirements set forth at the beginning of each new tax season.

In addition, twenty-one states have also created free income tax filing programs based on the Federal free tax filing program. This means you may also qualify to file your State taxes online for free with the Tax Freedom Edition tax software.

Here's a list of those 21 states:

Alabama, Arkansas, Arizona, Georgia, Idaho, Iowa, Kentucky, Massachusetts, Michigan, Minnesota, Missouri, Mississippi, Montana, New York, North Dakota, North Carolina, Oklahoma, Oregon, Rhode Island, Vermont, and West Virginia.

Using the web is no longer a novelty. It has become a universal tool for doing everything from our daily banking, to purchasing an airline ticket, to filing our taxes online. People are getting more into the habit of going online for many their daily needs. When you want find out virtually anything throughout the United States and the world, you can find it on the Internet

In my experience as President of SmartServ Solutions, I come across many new clients each year. Most new come to us as a result of my snazzy advertising or through a referral from one of our existing clients. Still others come because they are looking to get a bigger tax refund. I am all for getting the most money back from Uncle Sam. That is, the most legal money. In recent weeks, I have come across a large number of previously filed fraudulent tax returns from 2005. It is a very disturbing trend occurring in the tax preparation business. Before I explain what is going on with the fraudulent tax returns, I would like to give a brief overview of the different types of tax preparation companies. I would classify the tax preparation business into three major categories:

The large faceless tax franchises
Most of the large franchise tax places hire seasonal part time workers who are moonlighting for extra money. They receive training each year from their corporate offices on the new tax laws, but tax preparation is not their primary profession. This leads to in many cases sloppy work and missed deductions. Most of the franchise tax places close down after April 15th.

Independent tax preparation and accounting firms
Independent firms are typically small firms where tax preparers work year round and additional support staff is hired during tax season. Many of these types of firms stay open all year and supplement the rest of the year after tax season with related financial service businesses like accounting, mortgages, investments or insurance.

The “guy” or “girl” who gets big tax refunds
These people are everywhere. They typically work out of an apartment or small store. Their reputation for getting extremely large tax refunds has spread like wildfire. Everybody either knows this person or someone who goes to someone like it. Their offices or apartments are usually standing room only and people will wait hours and hours just for a chance to get their taxes prepared here. There is an unfortunate reality about this type of outfit. An income tax return can be easily manipulated to create a large “temporary” tax refund. I will get in to the reason why I say “temporarily” shortly. Some people actually get and deserve tax refunds upwards of $10,000, $15,000 or even $20,000. The right combination of children, babysitting, mortgage interest and taxes, large withholdings and education expenses will in many cases create such a large tax refund that is legitimate. However, there are many unscrupulous tax preparers in this category who illegally add some or all of the above deductions and credits to anyone’s tax return.

The sad truth is that the IRS will send you the money if you file a fraudulent return claiming an undeserving refund. The IRS is a slow moving big government bureaucracy. They may move slowly, but they do move. They have the capabilities of catching up with most of the tax fraud that is out there. It usually takes them a year or two or three after a tax return like this is filed, but they do catch those involved. What most people who utilize these types of tax preparers fail to realize is that they are completely responsible for the tax return that they file. A defense of “my tax preparer did it” or “I didn't know” isn't good enough for the IRS. Once you are caught filing such a tax return, you will be subject to pay back all of the money that you received illegally plus penalties, plus interest and possibly fines. And the IRS will get their money. They will use their power to place a tax levy against fraudsters which will give them the right to freeze assets like bank accounts and garnish salary. This is why I call an undeserving tax refund a “temporary” one. The IRS or State Department of Taxation also has the power to seek jail time if they find that there was fraud committed. Obviously, the unscrupulous tax preparers don’t tell this to their unsuspecting clients. I truly feel bad for these people. Most of them don’t understand the implications of filing a false tax return. I have met many people who have had their lives ruined by such circumstances. Life is too precious and it is not worth ruining your life for an extra couple of thousand dollars on your tax return that you don’t deserve. One tell tale sign that your tax preparer may be committing fraud on your tax return is that they refuse to sign the preparers part of your return. A tax preparer is required by the IRS to sign your tax return if they prepared it for you.

I want to personally caution all taxpayers of filing such a fraudulent tax return in order to receive an unjust refund. There are many legitimate deductions and credits that are available that can be found if you look hard enough. Please choose a tax preparation company who will go the extra mile for your interests while not putting your financial future in jeopardy by getting you in trouble with the IRS.

If you are over 70 1/2 years old, want to make a gift for a special charitable project, but your only liquid asset is your IRA, I have good news for you.

On August 17, 2006, the Pension Protection Act of 2006 (PPA 2006) was signed into law. This nearly 1,000 page piece of legislation marked the most sweeping changes to the pension arena in 30 years.

Let me give you two common examples that contain problems faced by seniors solved by PPA 2006…

Roger and Claire are retired. Roger spent his working career in the aerospace industry. He was more than well compensated and over the years accumulated a very large 401(k) plan. When he retired, he rolled his 401(k) into an IRA. Other than their home, the IRA is far and away their biggest asset.

For years, Roger and Claire have been supporters of the Humane Society. Their local chapter is building an entire new wing on to their kennels. Roger and Claire would love to make a significant donation—somewhere in the neighborhood of $50,000 to $100,000.

Bill and Diane both worked during their entire careers. Mary taught 6th grade for 40 years. Bill was a career military officer. After his retirement, he spent another 20 years working in the private sector. Like Roger, Bill has a large IRA.

When Bill turned 70 1/2, he was required to start taking the minimum required distributions each year from his IRA. But Bill and Diane don't need the income; their other retirement income sources are more than adequate. Nevertheless, Bill must take these RMDs and pay tax on them as income.

Bill and Diane have been active in their church all their married life. Their church just bought a new organ. The church did not pay cash for the organ; the majority of it was financed. Bill and Diane would like to pay off the organ.

Both Roger and Claire and Bill and Diane are warm-hearted people. But, prior to the passage of PPA 2006, their generosity could have been thwarted by several things…

1. In both cases, their principal liquid asset was an IRA. Neither couple had other assets from which to make a gift.

2. If the large sums were withdrawn from their IRAs, they would be subject to ordinary income tax.

3. If given to a charity, rules which limit the amount that could be deducted as a charitable contribution would have to be followed. This means that they may still have to pay tax on a portion of their IRA withdrawals.

But thanks to provisions in PPA 2006, Roger and Claire can make their gift to the Humane Society and Bill and Diane can pay off their church's new organ using money from their IRAs and not pay any tax on the withdrawals. But they have to follow the rules…

1. First, you must be at least 70 1/2.

2. You can give up to $100,000.

3. This only applies to 2006 and 2007.

4. You can't withdraw the money from your IRA and then give it to your charitable cause. The transfer must be made directly from the custodian of the IRA to the charity.

5. These gifts, called IRA charitable rollovers, count towards your required minimum distribution for the year.

6. IRA charitable rollovers are not permitted for gifts to donor advised funds and supporting organizations. However, there are some exceptions that apply to funds held by community foundations: scholarship, field of interest, and designated funds qualify. So the first step is to contact your intended cause to see how they are classified and whether or not the law allows an IRA charitable rollover gift.

7. The gift must be a pure gift. In other words, there can't be any personal benefit strings attached like tickets to an event.

8. You don't have to report the IRA charitable rollover as income.

9. However, you don't get a charitable deduction for your gift. Sorry, you can't have your cake and eat it too.

This new law is a real winner. In these two examples, the Humane Society is able to build new kennels and a church pays off an organ they thought they were going to have to finance. The donors were able to make it happen despite the fact that the only real asset they had was an IRA.

I do not dispense tax advice. It is imperative that you consult with your tax advisor and the charity to make sure it is qualified and that the gift is made in the proper manner.

The focus of this article is to show you what you need to qualify for free online tax filing. Because of an agreement between the Internal Revenue Service (IRS) and tax software companies, lower income taxpayers can be eligible to file their Federal and (in some cases) their State tax returns for free.

This is how it works

If you can meet any one of these 3 requirements, you can file your Federal and possibly your State tax return online for free. Here is a list of those 3 requirements. Remember, meeting only one of these requirements is enough to qualify.

* If you qualify for the earned income credit (EIC) for tax year 2006 then you qualify for free Federal tax filing.

* Have an adjusted gross income (AGI) of $28,500 or less in the year 2006.

* If you served active duty military and earned an adjusted gross income (AGI) of $52,000 or less in 2006 you qualify. Active duty military also includes Reservists and National Guard. You must have a 2006 W-2 form from the military to qualify.

The Tax Freedom Project offers free online tax preparation and electronic filing to taxpayers, who meet eligibility requirements announced at the beginning of each tax season. Taxpayers who qualify can e-file their federal returns for free with the 2006 Turbo Tax Freedom Edition software.

The free tax filing program is designed for lower income taxpayers with simple tax situations and includes IRS and State tax forms and schedules. However, it is not designed for more complex tax situations such as investments, rentals & royalties, farming, foreign earned income, partnerships, s corporations, estates or trusts.